NLRB Finds That Current Backpay Formula in Unlawful Discharge Cases is Inadequate

Monday, August 29, 2016

In a 3-1 decision, the National Labor Relations Board found in King Soopers that the Agency’s current backpay formula was inadequate to fulfill its fundamental charge to make victims whole following an unlawful termination. As such, the decision revised how the Agency will treat reasonable search-for-work and interim employment expenses, which previously could result in less than make-whole relief for discriminatees. Employees will now be compensated for such expenses even when interim earnings are nonexistent or less than those expenses.

Under Board law, discriminatees have a duty to mitigate losses due to their unlawful discharge, which generally means securing and maintaining interim employment. In the course of seeking new employment, discriminatees often face significant additional expenses such as transportation, room and board, and/or relocation costs.

Previously, the Board has treated these expenses as offsets to interim earnings, rather than as a separate component of the make-whole remedy. Prior to today, those who were unable to find interim employment received no reimbursement for their reasonable search-for-work and interim expenses. In addition, individuals whose interim earnings were less than these expenses would not have been fully compensated for their losses since such payments could not exceed interim earnings. The decision provides the following example to demonstrate the shortcomings of the prior approach:

Juana Perez worked at a remote location earning $1,000 per month prior to her unlawful discharge. During the month following her discharge, Perez spent $500 travelling to different locations looking for work. Perez could only find interim employment in another state that paid $750 per month. Perez moved to the new state to be closer to her new job and was also required to obtain training for her new position, costing her $5,000 and $500, respectively. Under the Board’s traditional approach, Perez would receive compensation for only $1,500 of her $6,000 total expenses, far less than make-whole relief.

The Board affirmed the Administrative Law Judge’s findings in the case but amended the remedy to reflect the new approach for awarding search-for-work and interim expenses. The Board ordered King Soopers to compensate the discriminatee for her search-for-work and interim-expenses regardless of whether those expenses exceed her interim earnings.